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Inside Smallcap Pharma
Most people think of the pharmaceutical industry as consisting only of large drug companies, but in reality, there are a myriad of small-sized pharma firms. Smallcap pharma is a subset of this space that has been garnering interest from investors lately. This blog post will explore some reasons why smallcap pharma stocks are worth keeping on your watchlist.
The Pharma sector continues to gain traction and maintain its strength against the broader market.
The Bubble chart helps us in observing the relative performance of the sector since 15th Feb '21, when Nifty 50 started to make its lower lows.
This bubble chart takes % change since Feb 15 '21 on X-axis and % change from 52 weeks high on Y-axis. Bubble size is determined by the Beta of the sector against the Nifty 50.
- Pharma FMCG and IT sector has low beta and Pharma has been resilient amongst them.
- Metal and commodities are outperforming.
Here's the Equi weighted index of Smallcap Pharma stocks in the Nifty 500. Price is on the verge of a breakout. We want to be in stocks that are outperforming the index and pose an excellent risk-reward chart setup.
Here an additional index covering pharma names outside nifty 500. (Based on metrics by Tijori Finance). This week, the price has broken out of a 3-year base.
Few interesting chart setup
- Strong momentum and outperforming the benchmarking index
- Breakout above the short-term base.
- 3-year base breakout
- 2-year base breakout
- Retesting the breakout level. 262 is a Polarity support level. Polarity occurs when previous resistance acts as support and vice versa.
- Looks strong above 380
Why do we care about the base breakout?
Within an uptrend, the price takes a pause and consolidates in a sideways fashion. It shows the accumulation by investors, which provides a move due to the possible increase of underlying support.